UK - Watson Wyatt has switched its defined benefit (DB) scheme from final salary, to career average, and raised the retirement age from 60 to 65.
The company closed its DB scheme to new members in 2002 and has entered into consultations to affect the changes in January 2008.
Babloo Ramamurthy, regional manager for Watson Wyatt Europe, said: “Our business faces exactly the same risks that many of our clients and other companies have faced in relation to the increasing costs of maintaining a final salary pension scheme.”
Watson Wyatt claimed this recent move would make the scheme more affordable as risk would be shared with its members and was not linked to investment issues.
Ramamurthy continued: “With the proposed changes we are also able to achieve a better balance in the value of the benefits being offered to all our associates.”
In a separate development, David Robertson, group secretariat for the Association of Consulting Actuaries (ACA), said its latest research had showed 81% of DB schemes had closed to new entrants; with 14% of the remaining schemes closed to further accrual.
Robertson added this trend looked set to continue: “Funds getting back in to surplus can have a double effect; on one hand some feel relieved to be back in the black and able to embrace investing again, but on the other hand, some are getting out while the going is good.”
The ACA has been advocating risk sharing pension schemes for the last two years.
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